Goods and Services Tax

Carry forward of KKC, EC etc., into GST – implications of recent Delhi High court decision

Goods and Services Tax – GST – By: – CA Venkata prasad Pasupuleti – Dated:- 10-3-2018 – Education Cess was being levied on Central Excise and Service Tax from 10.09.2014. Education Cess paid on the purchase was available as a credit against payment of education cess on payment on the output removal. The credit of cess was not able to use for the payment of duty. Later when the rate of excise duty was increased from 12% to 12.5%, cess was rescinded. Thereby the accumulated credit was not able to be used. Similar was in case of Krishi Kalyan Cess credit in case of service tax. Now whether this accumulated credit of cess can be carried forward into the GST under the transition provision is the issue, there were contradicting views on this some in favor and some against. Few of them have carried forward the credit, however recently, there were news articles published in the newspapers that companies carried forwarded the credit of KKC may face fine/penalties citing that the recent judgmen

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o do with the unutilized credit of EC/SHEC lying as on 01.03.2015/01.06.2015 whether it lapses or can be sought as a refund or used for the payment of tax/duty? A writ petition has been filed inter alia seeking direction that the credit accumulated as on 01st June 2015 on account of EC and SHEC should be allowed to be utilised for payment of service tax. Contentions: The petitioners claim a vested right to avail benefit of the unutilized amount of EC or SHE credit, which was available and had not been set off as on 1st March 2015 and 1st June 2015 for payment of tax on excisable goods and taxable services respectively. The contention was that EC and SHE were subsumed in the Central Excise Duty, the general rate of which was increased from 12% to 12.5%, and service tax, which was increased from 12.36% to 14%. Reliance is placed upon the Budget Speech of the Finance Minister and the memorandum explaining provisions of Finance Bill, 2015. Reference is also made to the TRU letter F.No.334/

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e 14 was not offended. Further, the Hon ble High Court held that there is no provision in the law which states that EC and SHEC are subsumed into Service Tax and Excise Duty to allow the cross-utilisation of credit. Thereby decision concluded that the credit of EC and SHEC cannot be used for the payment of excise duty. Implications on the Credit carried forwarded into GST: The decision of the Hon ble High court restricted to the subject of cross-utilisation of EC and SHEC against the payment of Central Excise or Service Tax. This judgment nowhere discusses the eligibility of CENVAT Credit of EC and SHEC and the same lapsing. Therefore it is of no dispute that the credit was eligible and did not lapse. Section 140 of CGST Act, 2017 entitles a registered person to carry forward the closing balance of CENVAT Credit in the last return filed under the existing law. CENVAT Credit has been defined in the explanation to section 142 giving the meaning assigned to it under Central Excise Act or

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ut has not discussed the first part i.e, CENVATABILITY of Cess which is essential to determine whether such credits can be carried forward to GST or not. As Cess passed the first criteria, the credit of the same can be carried forward to GST. As the issue decided by the Delhi High Court is related to cross-utilization of EC, SHEC which does not have any impact on CENVATABILITY of the cesses, the said decision does not have any impact on the credit carried forwarded into GST. Further, while giving the above judgment High Court has observed that there is no specific provision in existing laws stating that EC and SHEC are subsumed in Service Tax and Excise Duty. While introducing GST, Central Government has amended the Constitution of India by subsuming the Service tax and Excise Duty into GST and an article has been included requiring the GST Council to suggest the Cesses that should be subsumed into GST. The list of Cesses subsumed into GST also includes KKC and also there are exists re

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